Heartland v. Mcintosh Racing Stable

• Decision Date: 12 May 2006
• Docket Number: No. 32894.,32894.
• Citation: 632 S.E.2d 296
• Parties: HEARTLAND, L.L.C., a West Virginia Limited Liability Company, Carl D. Siegel, Rebecca A. Sears, and Hickory Plains, L.L.C., a Maryland Limited Liability Company Plaintiffs Below, Appellants v. McINTOSH RACING STABLE, L.L.C., a Virginia Limited Liability Company Defendant Below, Appellee.
• Court: West Virginia Supreme Court

Page 296

632 S.E.2d 296

HEARTLAND, L.L.C., a West Virginia Limited Liability Company, Carl D. Siegel, Rebecca A. Sears, and Hickory Plains, L.L.C., a Maryland Limited Liability Company Plaintiffs Below, Appellants v. McINTOSH RACING STABLE, L.L.C., a Virginia Limited Liability Company Defendant Below, Appellee.

No. 32894.

Supreme Court of Appeals of West Virginia.

Submitted March 29, 2006.

Decided May 12, 2006.

Syllabus by the Court

1. "A circuit court's entry of summary judgment is reviewed de novo." Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).

2. "A motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law." Syl. Pt. 3, Aetna Cas. & Sur. Co. v. Federal Ins. Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963).

3. "If there is no genuine issue as to any material fact summary judgment should be granted but such judgment must be denied if there is a genuine issue as to a material fact." Syl. Pt. 4, Aetna Cas. & Sur. Co. v. Federal Ins. Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963).

4. "A party who moves for summary judgment has the burden of showing that there is no genuine issue of material fact and any doubt as to the existence of such issue is resolved against the movant for such judgment." Syl. Pt. 6, Aetna Cas. & Sur. Co. v. Federal Ins. Co., 148 W.Va. 160, 133 S.E.2d 770 (1963).

5. "A deed must be upheld if possible. All instruments must be so construed as to pass an estate, when such was the intention; and it will be presumed from the making of a deed that the grantor intended to convey some property by it." Syl. Pt. 7, Proudfoot v. Proudfoot, 214 W.Va. 841, 591 S.E.2d 767 (2003).

6. "A deed will not be set aside for incapacity of the grantor, or for undue influence, misrepresentations, or fraud upon the part of the grantee, except upon a clear showing of one or more of these facts by the evidence." Syl. Pt. 1, Hardin v. Collins, 125 W.Va. 81, 23 S.E.2d 916 (1942).

7. A deed drawn and executed in anticipation of the creation of the grantee as a corporation, limited liability company, or other legal entity entitled to hold real property is not invalidated because the grantee entity had not been established as required by law at the time of such execution, if the entity is in fact created thereafter in compliance with the requirements of law and the executed deed is properly delivered to the entity, the grantee, after its creation.

Michael J. Farrell, Robert L. Hogan, Farrell, Farrell & Farrell, L.C., Huntington, for the Appellants.

Kenneth J. Barton, Jr., Brendan S. Leary, Steptoe & Johnson, P.L.L.C., Martinsburg, for the Appellee.

ALBRIGHT, Justice:

This is an appeal by Heartland, L.L.C., Carl D. Siegel, II, Rebecca A. Sears, and Hickory Plains, L.L.C., (hereinafter "Appellants") from a summary judgment order entered by the Circuit Court of Jefferson County in favor of the Appellee, McIntosh Racing Stable, L.L.C. (hereinafter "Appellee" or "McIntosh Racing"). The Appellants instituted this civil action against the Appellee for breach of contract regarding the sale of a horse stable located in Jefferson County, West Virginia. The Appellants contend that the lower court erred by granting summary judgment in favor of the Appellee and maintain that genuine issues of material fact remain for jury determination. Upon thorough evaluation of the record, briefs, arguments of counsel, and applicable precedent, this Court reverses the summary judgment order of the lower court and remands this matter for further proceedings consistent with this opinion.

I. Factual and Procedural History

On January 12, 2003, Dr. Siegel, Ms. Sears, and Marc J. Sharp entered into a written purchase agreement to purchase a horse stable¹ and real estate from the Appellee, McIntosh Racing, for $400,00.00.² In February 2003, a severe snow storm caused a portion of the stable's roof to collapse, necessitating extensive repair. On April 4, 2003, a dry closing³ was conducted, with attorney Charles Howard jointly retained to handle the closing. The record contains significant deposition testimony regarding the discussions and agreements generated at this dry closing. Mr. John McIntosh, owner of the horse stable and representative of Appellee McIntosh Racing, participated in the dry closing. The initial purchasers, including Mr. Sharp, Dr. Siegel, and Ms. Sears, also participated in the dry closing. Attendees also included Randy L. Cohen, representative of Hickory Plains, L.L.C.; Sarah Stern, daughter of Mr. McIntosh; and Franklin "Greg" Smith, a horse trainer working with Mr. Cohen.

The Appellants contend that the parties agreed at the dry closing that one of the original purchasers, Mr. Sharp, was to be replaced by purchaser Hickory Plains, L.L.C., represented at the dry closing by Mr. Cohen. Hickory Plains, L.L.C. would then partner with Dr. Siegel and Ms. Sears to create Heartland, L.L.C. (hereinafter "Heartland"). The Appellants also contend that based upon the required roof repairs, the parties agreed that the purchase would not be completed until the Appellee had repaired the roof and had obtained a certificate of occupancy for the stable.

Furthermore, the Appellants maintain that there was considerable discussion at the dry closing regarding the fact that Mr. Siegel, Ms. Sears, and Hickory Plains, L.L.C., intended to create the limited liability company under the name of Heartland, to own and manage the horse stable being purchased. The record reveals that the Articles of Organization for Heartland were signed at the dry closing, in the presence of Mr. McIntosh and all attendees. The attorney, Mr. Howard, testified that he had planned to file those Articles of Organization with the West Virginia Secretary of State's office at a later date, thereby officially creating the legal entity of Heartland. A limited liability company is a specialized type of organizational entity, first established in this state in 1996 and presently appearing in Chapter 31B of the West Virginia Code.⁴ West Virginia Code § 31B-2-201 (1996) (Repl. Vol. 2003) specifies that "[a] limited liability company is a legal entity distinct from its members." See also Larry E. Ribstein, A Critique of the Uniform Limited Liability Company Act, 25 Stetson L.Rev. 311 (Winter 1995).

Based upon the intent to formally organize a limited liability company under the name of Heartland, the deed to the property was prepared with the grantee name of Heartland. A deed of trust was executed at the dry closing for the balance of the purchase price, $330,000.00, with the Appellee as the lender.

On April 18, 2003, a notice of condemnation was issued regarding the stable. Repairs were apparently attempted during the ensuing months, but the purchase was never completed.⁵ On August 15, 2003, the Appellee sought to rescind the agreement to sell the stable to Heartland based upon the fact that Heartland had not been properly organized under West Virginia law as a limited liability company. The Appellee contended that it had not entered into a binding contract with a competent party since Heartland did not technically exist at the time the deed was signed. The Appellee maintains that it had no knowledge that Heartland was not a formally organized limited liability company at the time the deed was signed at the dry closing. Mr. McIntosh testified in his deposition that he was unaware of the status of the formation of Heartland during the dry closing. He was, however, aware that repairs to the roof of the stable needed to be completed before the transaction could be completed.

On October 1, 2003, Heartland's Articles of Organization were filed with West Virginia Secretary of State's Office. The Appellants instituted this civil action the following day, seeking specific performance and alleging breach of contract. Subsequent to substantial discovery, the lower court granted the Appellee's motion for summary judgment on March 16, 2005, finding as follows: (1) Heartland was not a party to the contract since it did not exist until October 1, 2003; (2) Heartland unreasonably delayed in filing Articles of Organization after the documents were signed at the dry closing on April 4, 2003; (3) purchase, deed, and loan documents signed at the dry closing lacked mutuality of remedy and mutual assent; (4) there was no proper assignment of interest in accordance with Statute of Frauds;⁶ and (5) the Appellee was justified in rescinding the contract because the initial purchasers did not attempt to close the transaction within a reasonable period of time.

The Appellants contend that the lower court erred by granting summary judgment based upon the following:⁷ (1) questions of fact exist regarding the agreements made at the dry closing, thereby precluding summary judgment; (2) the assignment of the right to become a participant in the transaction did not violate the Statute of Frauds; and (3) the lower court should have permitted a jury to determine the reasonableness of the delay in attempting to close the transaction.

II. Standard of Review

Pursuant to Rule 56 of the West Virginia Rules of Civil Procedure, summary judgment is required when the record reveals that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." W.Va.R.Civ.Pro. 56(c); see also Hager v. Marshall, 202 W.Va. 577, 505 S.E.2d 640 (1998). In reviewing a lower court's entry of summary judgment, this Court applies a de novo review. See Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994) ("A circuit court's entry of summary judgment is reviewed de novo").

This Court has repeatedly stated that "[a] motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not...